California: What is the Made Whole Doctrine?

Misinformation abounds when people speak of the Made Whole Doctrine. This principle is important and should be understood by anyone with a personal injury or property damage claim. Let’s define and discuss the Made Whole Doctrine and California Subrogation Laws, and then apply the Made Whole Doctrine in the context of Personal Injury and Property Damage.

Be forewarned: this area of the law is tricky and cumbersome. Assumptions are made and only general principles are discussed. For example, liens and reduction of liens are not explicitly discussed. Policy limits and Med Pay are also not discussed.

The Made Whole Doctrine simply means that the insured (you) must be “made whole” before the insurer (your insurance company). It prevents your insurance company from taking money from someone who injured you or damaged your property unless you’re compensated. Of course that sentence doesn’t make complete sense until you understand California subrogation laws.

California Subrogation Laws

Insurance companies have reimbursement rights. California recognizes and allows an insurance company to be reimbursed for monies paid on behalf of its insured.

Subrogation is reimbursement. It arises when your insurance company pays money on your behalf and then seeks to be reimbursed by either (1) you; or (2) the insurance company of the responsible party.

Here are 2 common examples of California Subrogation Law in practice.

You are injured in a car accident and have no health insurance. An ambulance takes you to the ER, where you are treated. Your medical bills from the ambulance and ER total $3000, and you give them to your car insurance company. The insurance company pays the bills, and then you hire a San Diego Personal Injury Attorney to sue the other driver. You get $10,000 from the other driver. Your insurance company then demands you pay them the $3000.

Your home is destroyed by a fire negligently caused by your neighbor. Your home insurance company pays $100,000 for your home to be repaired. You then hire a San Diego Property Damage Attorney to sue the neighbor. You and your neighbor agree that he will settle the claim for $150,000. But then your home insurance company demands your neighbor pay them the $100,000.

How to Apply the Made Whole Doctrine to Your San Diego Personal Injury Claim

Take the first example. Your San Diego Personal Injury Attorney takes his 1/3 attorney fee ($3300) from the $10,000, leaving you $6700. Assume there are $700 worth of costs that you have to pay (e.g. the filing fee, medical records). Now you have $6000. In addition to the ambulance and ER bills totaling $3000, you have a $2000 bill for physical therapy. Now you only have $1,000, and your doctor has recommended you undergo additional physical therapy. Your car insurance company then tells you to pay them $3,000.

In that case, your San Diego Personal Injury Attorney should argue that your car insurance company is not entitled to the $3,000, or at least to the entire $3,000, because you have not been “made whole.” The $10,000 settlement did not make you whole because additional treatment is required and you only have $1,000 left after the attorney fee, costs, and medical bills.

How to Apply the Made Whole Doctrine to Your San Diego Property Damage Claim

Take the second example. The damage to your home will cost $300,000 to repair. Your home insurance company has paid you $100,000. Your San Diego Property Damage Attorney has gotten your neighbor to agree to pay you $150,000. You still need $50,000 to complete the repair. But now your home insurance company demands your neighbor pay them $100,000. He tells you that if he pays them the $100,000, he won’t pay you the $150,000.

In that case, your San Diego Property Damage Attorney should argue that your home insurance company is not entitled to the $100,000 because you have not been “made whole.” Even after taking $100,000 from the insurance company and $150,000 from your neighbor, you still need $50,000 to complete the repair.

Conclusion

I know this area is hard to understand, but it’s crucial and it affects the amount of money you receive. Best speak with a San Diego Personal Injury Attorney or San Diego Property Damage Attorney who understands the Made Whole Doctrine in the context of Personal Injury and Property Damage claims.